China exerts heavy hand on independent ag analysts

Private forecasters in China often contradict official crop projections, such as when they drew attention last fall to crop damage caused by successive typhoons, even as the government touted new record-setting production. However, there are now reports that some of these analysts have been arrested and their companies shut down. | Reuters photo

An apparent crackdown on firms that independently track China’s agricultural supply and demand data is disturbing because the Asian giant has a huge impact on global grain and meat markets.

An example of China’s influence was felt last week when its buying halted a seven-day, almost 16 percent collapse in soybean futures.

All crop futures were under pressure during the week as markets responded to a forecast for rain in the dry Midwest, a stronger American dollar and recent slower pace of United States export sales.

On June 17 alone, November soybeans fell a whopping 82.5 cents per bushel, but the meltdown halted June 18 on news that China took advantage of the slump to buy eight shiploads, or about 480,000 tonnes, helping the contract to bounce back by 60.25 cents.

But China’s influence goes beyond daily moves.

It is an enormous consumer and producer of food and any change in those patterns has implications for the global food system.

It is critical to keep track of its food production, but the accuracy of the data provided by China’s government on the size of its crops and the amount of grain in storage has long been questioned. However, that devolved into ridicule and disbelief in the past year as its corn imports soared even as official data implied that it still had huge corn stockpiles.

The issue hit the headlines last fall when private forecasters drew attention to crop damage caused by successive typhoons that hit northeastern growing regions even as the government was issuing its normal self-congratulatory pronouncements about new record-setting production.

International news agencies now report that employees of two influential private agricultural data firms have been arrested or otherwise detained.

In late April, Bejing-based stopped updating its website and providing information to international data publishers. News agency Reuters reported in May that it was unable to contact Cofeed’s analysts, that the police had sealed the doors of its office and police had not replied to requests for information.

Last week, Australia’s ABC News rural service reported that grain analysts in that country believe that the head of JC International, a Shanghai-based provider of independent news and data on China’s agriculture, had also been arrested, although the JCI website is still operating.

The ABC story quoted Australian analyst Nick Crundall of Market Check speculating that China’s authorities want to control information about food supply to prevent domestic worries and to prevent run up in international prices if they need to import large volumes.

Indeed, lack of solid information about China’s real need for corn allowed it to buy substantial quantities before the world market was fully aware and before prices peaked this winter. The situation brought back memories of Russia’s great grain robbery of the 1970s.

Last fall, Beijing made no move to officially raise its corn low-tariff rate quota of 7.2 million tonnes for calendar year 2020 even though companies there were rapidly ramping up deals to import corn and private analysts were drawing attention to production problems, soaring domestic corn prices and talk of the need for huge imports.

China ultimately took in 11.3 million tonnes of corn in 2020, but that was just the start of its buying.

The U.S. Department of Agriculture now estimates that in the 2020-21 crop year China will import 26 million tonnes of corn and the same amount in 2021-22.

That is a huge increase over the previous five-year annual average of 4.2 million and will make it the world’s largest importer of corn.

This was not really a robbery but the lack of clear information did benefit Beijing, at least in its early buying.

Ultimately, this unforeseen demand helped change the U.S. corn balance sheet for the better for feedgrain growers.

Last September, the USDA forecast year end 2020-21 corn stocks rising 25 percent to 2.5 billion bushels. Today the forecast is for a decline to a tight 1.1 billion bu.

Also, we can’t overlook the difficulty of keeping track of production and stocks in a huge country such as China.

Even the USDA with all its resources can make large data revisions over time. For example, last September it estimated American corn production at 14.9 billion bu., but today the estimate is 14.18 billion.

But in the U.S. and Canada there are many private analysts that publish their own estimates of supply and demand, providing a “ground truthing” to the official numbers.

If Beijing is indeed cracking down on independent analysts in China, it will further cloud our understanding of its needs and set up potential shocks to our assumptions about global supply and demand.

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